Buying a Townhouse in Vancouver, Market Update
Waiting for Interest Rates to Drop Further? You May Want to Reconsider
For the last few years, homebuyers in Vancouver have been playing a strategic waiting game. As realtors specializing in Vancouver townhomes, we get it. Between stress tests and higher-than-normal lending rates, it’s hard to qualify for a mortgage, leaving people desperate to get out of the rental market.
Now that we’ve seen the second rate drop from the Bank of Canada, many buyers are wondering if it’s time to take the plunge or wait for lower rates. Waiting for lower rates could offer substantial savings over the long term—but is that really how it will play out?
As longtime realtors focused on Vancouver’s townhouse segment, we know how quickly this market can change. Amidst all the anticipation, home buyers need to be aware that many people are waiting for a chance to jump into the market. At least part of the reason the Bank of Canada is cautiously and slowly lowering interest rates is to avoid giving the real estate market an unnecessary jolt, which could drive up housing prices substantially.
Homeowners need to weigh if the benefit of lower interest outweighs potential price appreciation in the housing market.
It’s a delicate balance of math and timing. The mortgage stress test is 2% higher than the interest rate. When buying a home, homeowners must consider whether they meet the stress test requirements and whether mortgage payments are sustainable over the long term.
Buyer psychology is keeping many potential homeowners on the sidelines. The prevailing hope seems to be that both interest rates and real estate prices will go down—but what typically happens, at least in Vancouver, is that housing demand increases as interest rates go down, causing home prices to go up and eating up any savings realized by a lower interest rate.
It’s the scenario the Bank of Canada is grappling with right now. While inflation seems to be heading in the right direction, the bank is still taking a cautionary approach to avoid inflating the market. Potential homebuyers need to consider if it’s worth investing when the market is somewhat subdued and then hoping for lower rates—or waiting until interest rates drop decisively, which could quickly push up home prices.
For the most part, Vancouver seems to have hit its boiling rate at a lending rate of 7.20% (Canada’s general consumer prime rate). That’s what it took to stop skyrocketing prices. The market has now evened out, especially for single-family residences, although Vancouver townhomes and condos continue to be sought-after, especially when there are some bargains to be had.
The high interest rate did not trigger a plummet or crash. Instead, Vancouver’s housing market feels a lot like jumping up and down on an ascending escalator—not something we endorse or recommend. Basically, there will be some hiccups in the pricing, but overall, market prices continue to climb in a stable, predictable manner.
In a nutshell, waiting for rates to drop or markets to cool might not be a sound strategy. Homeowners who are financially ready should consider jumping in and taking advantage of Vancouver’s conditions, which currently offer selection, time, and room to negotiate.
Real estate metrics in BC suggest prices could rise by around 7%, a consideration as you wait for the interest rate to drop. People on the fence about buying a home can take the first steps by connecting with one of our experienced realtors. It’s essential to do the math and determine if saving on interest is worth spending more on the home. There are tools and solutions to help Canadians take advantage of better interest rates when they roll around.
Townhomes in Vancouver
A Canadian home remains a reliable, tax-exempt asset—and every dollar means more equity in your property. Want to learn more about purchasing a townhome in Vancouver? Connect with Ariane Benjamin at 604.779.1500